Three things you may miss out in legal due diligence

Due Diligence

1. Boilerplate clauses in agreements are usually not controversial. Nothing that makes your eyes widen in surprise or your heart skips a beat.

Notice provisions with the header “NOTICE” towards the end of agreements usually set out the mode of serving notice, the timeline by which notice is deemed to be served and contact details for serving notice.

However, there are rare occasions where these notice provisions include a requirement to notify a counterparty if there is a change in control of a party. If you skip boilerplate clauses when carrying due diligence, you would have missed this.

2. The due diligence exercise has been going on for some time. The representative of the target company has been providing the documents you requested in batches.

As you go through yet another batch of documents provided, you go straight to the body of an agreement to extract the salient terms into your legal due diligence report.

Have you checked the front page where the name of the parties are set out? The representative of the target company has mistakenly provided an agreement entered into by another company (with similar name to the target company owned by the same shareholders), not the target company.

3. You are deep in the legal due diligence exercise. You have experience in legal due diligence which means you know what to look out for when reviewing contracts for legal due diligence. As you are skimming the headers to look for specific clauses instead of reading line by line, you may not have noticed that there is a missing page from the copy of the contract you are reviewing.


This post was first posted on Linkedin on 2 August 2022.

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